Income, Outgo And `Fair Share`

February 07, 1985|By James W. Fossett and J. Fred Giertz.

A report by the Illinois Legislative Council (now the Legislative Research Unit) that compares state tax payments with program receipts for individual counties seems certain to reopen one of the most enduring and rancorous debates in Illinois politics.

Drawing evidence from the report`s findings that Chicago-area counties contribute more in state taxes than they receive in state expenditures, suburban representatives have begun to press claims for additional state support on the grounds that they are not receiving their ``fair share`` of state services. Downstate representatives can be expected to resist these efforts and defend the existing distribution of expenditures.

Such a debate is unfortunate, since it is far from clear that the geographic distribution of state taxes and expenditures is substantially unfair. There is no necessary connection between state expenditures in a particular county and the benefits its citizens derive from the services state agencies provide. Chicago-area residents benefit from statewide activities such as protection from crime by state law enforcement and corrections operations, education provided by state colleges and universities and environmental protection from the state`s public health and environmental control agencies. These benefits are not less real to area residents just because the police officers, prison guards, professors and engineers who provide the services happen to live elsewhere in the state.

An examination of who uses state services, rather than where the services are located, shows that Chicago-area citizens receive the lion`s share of such benefits. According to the Legislative Council`s report, only about half of state expenditures for payroll and operations were made in Cook or the five collar counties, yet these areas provided 65 percent of the in-patients in the state`s mental health facilities, two-thirds of the freshmen at the state`s universities and almost 70 percent of the felony defendants newly incarcerated in state prisons. Clearly, the Chicago area benefits--and quite substantially --from expenditures elsewhere in Illinois.

Further, many state programs are explicitly designed to provide services to the poor and other disadvantaged groups. These programs should not be expected to distribute money evenly among counties. The state`s public aid programs, for example, which consume 17 cents of every dollar the state spends, are expressly intended to assist low-income people in need, resulting in heavy expenditures in counties with large concentrations of these groups.

In similar fashion, the formula used to distribute state aid to elementary and secondary school districts, which accounts for 20 cents of every state expenditure dollar, was designed to favor districts in less prosperous areas. In fact, the current formula has been criticized severely for not favoring poor districts enough. Both these programs are expected to provide more resources to certain areas, and findings that they were providing equal resources ro rich and poor areas alike would be evidence that they were failing to achieve the goals they were designed to fulfill.

There are similar problems with criticism of the state`s tax system for extracting more money from some areas than others. The Illinois tax system is roughly proportional in that families with different incomes pay approximately the same fraction of their incomes in state taxes. This is not unfair; it is what the state tax system was meant to do.

On a more technical level, it is very difficult to determine who really pays many state taxes. The ultimate burden of the tax may be shifted from the individual or organization who actually pays the government to other individuals or organizations who may not even live in the same county. State corporate income and sales taxes, for example, are initially paid in one county, but may be passed on to the customers residing in other areas.

The geographic distribution of taxes and spending across Illinois counties may not be completely equitable. However, the simple existence of disparities among counties in the ratio of state expenditures to state taxes does not provide any evidence, much less conclusive proof, that something is amiss. Indeed, with a tax system designed to take more funds (but not a higher fraction of income) from wealthier families along with many expenditure programs designed to provide assistance to the poor, such disparities are to be expected. In fact, if such disparities did not appear, the state government would not be doing its job effectively.